Japan's Economic Output Declines as Exports Face Impact by American Tariffs
Japan's economy has recorded a contraction for the initial time in a year and a half, primarily caused by weakening overseas shipments because of newly imposed American tariffs.
G7 Growth Standings
The Japanese economy stands as the first G7 country to announce an GDP decline in the previous quarter.
With the United States yet to release its gross domestic product data for the third quarter, the current G7 economic standings display:
- France: 0.5 percent quarterly growth
- United Kingdom: 0.1 percent
- Canadian economy: 0.1 percent (preliminary figure)
- German economy: zero growth
- Italy: 0%
- Japan: negative 0.4 percent
Travel Stocks Decline amid Political Rift with China
Alongside the economic contraction, Japan is dealing with an escalating political conflict with China concerning Taiwan.
Shares in Japanese travel and consumer companies have declined sharply after China urged its residents to refrain from visiting to Japan.
This decision by Beijing escalated a political dispute that was initiated by statements from Tokyo's new PM about the potential of deploying forces in the event of a potential Chinese attack on Taiwan.
The development triggered a surge of selling across Japanese leisure shares.
- The Tokyo Disneyland operator shares dropped by 5.7 percent
- The department store chain tumbled by 11.3%
- Japan Airlines fell by 3.75 percent
"The China-Japan tension over Taiwan and Beijing's travel warning advising against visits to Japan brings near-term difficulties for retail and hospitality sectors.
"Tourists from China account for roughly 25 percent of Japan's inbound traffic, making retail outlets, high-end shopping, and hospitality especially vulnerable."
GDP Contraction Breakdown
Japanese GDP dropped by 0.4 percent in the July-September quarter, as industrial overseas shipments were impacted by duties imposed by the United States this year.
Exports were a primary driver of the contraction, falling by 1.2% compared with the April-June quarter, and were 4.5% lower than a the same period last year.
Previously, the US administration had threatened Japan with a additional 25% tariff on its goods, which was later lowered to 15% when the two countries concluded a trade deal.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's real gross domestic product shrank by 1.8% in the three months through September.
"The Japanese economic situation was stable in the first half of this year and today's GDP data showed that momentum is halted for now.
I expect Japan's economy to be returning on a moderate growth trend going forward."
The White House has recently acknowledged the impact of tariffs on US consumers, lowering tariffs on food imports including beef, tomatoes, beverages and fruits amid increasing concerns about increasing costs.
Economic Calendar
- 8am GMT: Swiss GDP report for Q3
- 3pm GMT: US construction spending data for August
